After a good end to a not-so-good year, President Barack Obama faces even tougher challenges in the months ahead as looming fights over spending and healthcare set the stage for a difficult 2012 re-election campaign.
When a new Congress convenes on Wednesday, Obama will be confronted for the first time by a Republican majority in the House of Representatives and a strengthened Republican minority in the Senate.
Whether he strikes deals with those newly powerful foes and continues the momentum built in December's "lame-duck" Congress or becomes mired in another bout of legislative gridlock could be a critical factor in Obama's prospects for a second term.
"The political climate is about to completely change for Obama, and how those budget and healthcare battles play out will really determine his status for the race in 2012," said Steven Schier, a political analyst at Carleton College in Minnesota.
A burst of accomplishment in Congress during the final days of December produced a tax deal with Republicans, repeal of the ban on gays serving openly in the military and ratification of a new nuclear arms treaty with Russia.
Those triumphs for Obama followed months of economic doldrums, stubbornly high unemployment and sinking approval ratings that culminated in November's self-described election "shellacking."
Before heading to Hawaii for his Christmas vacation, Obama said the achievements of December showed what could happen when both parties work together. He also acknowledged the bipartisan mood could be short-lived.
"I'm not naive. I know there will be tough fights in the months ahead," Obama said. "But my hope heading into the new year is that we can continue to heed the message of the American people and hold to a spirit of common purpose."
Topping the agenda in the new Congress will be a clash over government spending and deficit reduction, with Republicans itching to push through dramatic spending cuts before a bill to fund the government expires on March 4.
Obama and his fellow Democrats are likely to object to Republican priorities for proposed spending cuts of as much as $100 billion. Democrats have warned against sharp reductions in social services, particularly in a sluggish economy.
Republicans also have promised to take a stab at rolling back Obama's landmark healthcare overhaul, an issue certain to face heavy opposition from Obama and Democrats.
Obama will have a chance to offer his own vision early in the year when he makes a State of the Union speech to Congress and unveils a new budget, and he could propose some form of tax reform as a way to reach a major deal with Republicans.
"What will really tell the tale is whether Obama can be taken as credible on deficits and debt, because that is how he gets the attention of independents and moderates again," said Cal Jillson, a political analyst at Southern Methodist University in Texas.
Those centrist voters, a critical part of Obama's 2008 election coalition, deserted Obama and Democrats in 2010. For Obama, winning them back could be more critical than keeping the party's liberal wing, already angry about his tax-cut deal with Republicans, in his camp.
Polls show the deal to extend Bush-era tax cuts to all Americans, despite Obama's campaign promise to raise taxes on the wealthy, has been popular with most Americans.
Obama could be guided by the example set by Democrat Bill Clinton, who won re-election to the White House in 1996 by moving to the center and compromising with Republicans after Democrats suffered huge losses in the 1994 midterm elections.
"It's not detrimental to Obama in a political sense to be seen as compromising with Republicans," Jillson said. "If he does it in a clever way, he can win back those independents because they continue to like him personally."
Republicans, who spent most of the last two years opposing Obama's initiatives, will face pressures of their own as they take on new governing responsibilities while trying to satisfy conservative Tea Party activists pushing for spending cuts.
Obama also is expected to make at least some changes in his White House team in the new year, with senior adviser David Axelrod headed home to Chicago to begin planning for the 2012 campaign and other shifts likely.
Republican presidential challengers are expected to begin launching their campaigns during the first few months of the year, meaning the pressure in both parties to stake out political turf rather than compromise will begin early.
For Obama, regaining the spirit and message that infused his winning 2008 campaign could be more important than specific policy victories, said Karlyn Bowman, a public opinion analyst at the American Enterprise Institute.
"The bigger challenge for him will be giving people a sense of optimism. He needs to reconnect with people in the way he did in the campaign," she said. "Americans still want Obama to succeed. The fact he leads nearly all Republican contenders indicates his underlying strength."
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